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All in the family: Mark Smucker is fifth generation to head the food giant

By Dan Shingler

Photo by GIULIA BERNARDELLI ILLUSTRATION

DAN SHINGLER

It would have been easier for Mark Smucker if he’d been born earlier.

If he’d been only the second, third or fourth generation of his family to run the big and famous J.M. Smucker Co. business in Orrville, he’d have only had one business to run, maybe two.

As it is, he’s the fifth of his line to ascend to the company’s CEO post and he comes at a time when the company has become a behemoth. He sits atop three separate lines of business, each with about $2 billion in annual sales.

“I’ve got a lot of people helping me,” he said, referring not only to family members like his “cool uncle” Richard — who became executive chairman when Mark became CEO on May 1 — but to the 7,000 people that the company employs.

It was not a foregone conclusion that another member of the family would take the helm. One might imagine that Wall Street might look on and say: “Really? Another Smucker? That’s the best choice?” and have a valid question.

“They did say that!” noted the 46-year-old Mark Smucker.

But the company’s board, as it has always done, valued the company’s values and culture above all else, and sees it as key to the company’s success, said Richard.

“You certainly can’t do it without the skills, which he has. Then the question is how important is culture on top of that — and it’s very important,” Richard said. “Actually, our board considered external and internal candidates — and the impact of each on the company.”

Investors seem to approve. Smucker’s stock has risen from $127 per share to about $130 in the two weeks after Mark was named CEO.

Orrville didn’t mind, either, and Mayor Dave Handwerk said he’s very happy to see another Smucker take the company’s top job, because the company’s culture is important to the town where it employs about 1,700 people.

“I am very proud, no matter where I travel, to say that Orrville is the home of the J.M. Smucker Co. I can think of no better example of a community-minded business,” Handwerk said. “Mark is younger, but going to be a great leader.”

Not that Mark didn’t have a bit of an advantage over most outsiders — or insiders, for that matter — in terms of knowing the business. Like most members of his family, he started working at the company’s main Orrville plant when he was 16. He also had to, per the family’s self-imposed rules, try something else first, and get a master’s degree.

Check, and check. Mark got his bachelor’s degree in geology and an MBA. He taught high school in Alabama and then went into advertising in South America, where he worked on Proctor and Gamble accounts for Leo Burnett. At his father’s urging, he joined the company full-time in 1998. He remained in South America for a couple of years, working for Smucker’s, before returning home, buying a home in West Akron and working in Orrville.

Now, with almost 20 years under his belt as a company executive, Mark has what could be one of the greatest challenges in business: taking over a successful company, maintaining its success and growing it at the same time.

DAN SHINGLER

The full spread

For those who have not been watching in recent decades, Smucker’s is a lot more than a jelly and jam company. It consists of more than 80 brands, including American icons like Jif Peanut Butter, Folgers Coffee, Pilsbury and, as of late, Milk-Bone, Meow Mix and Kibbles ’n Bits dog food.

“We’re the center of the store,” Mark said, explaining that the company does not deal with the perishable or refrigerated foods that occupy the perimeters of most grocery stores and, instead, focuses on the canned, boxed and bagged items that tend to be in the middle of the market.

The empire is almost evenly divided in terms of sales among its three major business lines: coffee, consumer foods and pet foods. For the quarter ended Jan. 31, the company reported revenues of $1.97 billion. Coffee accounted for 29.2% of sales, consumer food was 28.9% and pet foods contributed 28% of sales. The company’s international and food service business, which sells products from the other segments, made up 13% of sales.

“It’s a third, a third and a third,” Richard said of the company’s diversification.

Mark’s job is to sustain and grow all three.

Job one will likely be for the company to stick to its knitting — keeping its values of “the golden rule and common sense” in place and continuing to integrate its most recent big acquisition, the purchase of Big Heart Pet Brands a little more than a year ago for $6 billion.

That company brought Smucker’s into the pet food and treats market in a big way and added about $2 billion a year to the company’s current sales. The sales gains came quickly and, to some degree, almost automatically. Now Mark must ensure that Smucker’s integrates the company to realize $200 million in annual cost savings.

Toward that end, Smucker’s will close one of Big Heart’s two headquarters, in Pittsburgh, while maintaining the other in San Francisco, Mark said.

Smucker’s realized about $35 million in annual savings from the integration of Big Heart in its fiscal year that ended April 30, Mark said. It will work this year to cut another $90 million from Big Heart’s cost structure, and then try to get at least another $75 million out the following year. All of that savings will go straight to the company’s bottom line, he said.

“Anything above $200 million will be reinvested in the business,” he said.

Still hungry?

One way that Smucker’s invests its money is in acquisitions. Mark divides them into three categories: “transformative” acquisitions that change the company the way the Big Heart deal did, “enabling” acquisitions that bring the company product lines related to its existing brands, and “bolt-on” acquisitions that can be added to existing business lines.

The transformative deals come infrequently and the company will react to them as opportunities come up, but it can do smaller bolt-on and enabling deals almost anytime, Mark said.

Such deals are also where Mark might put his own stamp on the company. Younger and perhaps more worldly than his predecessors, Mark is a bit of a new breed of Smucker.

For example, one of the first things he did as CEO was to allow employees — even executives — to wear jeans to work whenever they like. That was a no-no under Richard and those who came before, and the amount of rigid, unwashed new denim walking around the company’s executive suites might be telling, with regard to how big a change that is for company executives.

About 20% of Smucker’s brands account for about 80% of the company’s sales, Mark said. It’s critical to keep those big brands healthy, and doing that enables the company to pay for smaller acquisitions. Often, that means buying companies making modern, trendy foods, like when Smucker’s purchased Seattle-based Sahale Snacks Inc., a maker of what Mark terms “salted nuts and snacks for foodies.”

Smucker’s did not disclose what it paid for Sahale, but with annual sales of about $50 million it was surely an easy buy for the Orrville giant. Nonetheless, it’s an obvious favorite of Mark. It’s the first small acquisition he mentions, the first new snack food he mentions and the product he brings out to give to a reporter asking about important new brands.

As CEO, Mark is now in a position to pick future, small acquisitions that he thinks will position the company for future growth.

“Those smaller brands allow us to go after trends that are happening, with more of a modest investment, while we see if they turn out to be big ideas,” Mark said.

The company will be on the lookout for such deals, he said, and can do them without having to bring in investment bankers or tinker much with its balance sheet.

Bigger deals, if they present themselves, will still get done — they’ll just require a bit more financial work, Richard said.

“You never know when someone is going to be willing to sell a brand or a business, but when they are you, we have to be ready. And we are,” Richard said.

In the meantime, Smucker’s will keep up its usual regimen of heavy marketing, which only grows in scope as the company’s line of products expands. That means big ad campaigns for products, like Smucker’s “Uncrustables” sandwiches, continued support for stalwart products like Jif Peanut Butter, campaigns for the new pet food lines and continued support for the U.S. Olympic team.

That last effort might be Mark’s favorite, since it means being involved with the Olympics in Brazil, a place Mark knows well and still loves. Will he go personally to support both the team and his company’s efforts even in light of the Zika virus that has broken out in South America? You bet.